This article was first published in the April 2016 UK edition of Accounting and Business magazine.

In autumn 2015, the US-based multinational conglomerate GE announced that it was creating a new business unit, GE Digital. The digital company is intended to take on IBM and the large analytics players, and become a leader in the industrial internet of things. The new business model is headed up by Bill Ruh, formerly GE’s vice president and global technology director. He now has the job title of chief digital officer (CDO). Ruh has the responsibility – along with chairman and CEO Jeffrey Immelt – of turning GE into one of the world’s premier digital industrial companies. 

For such a big role, it is not a well-known job title. According to Tim Bourgeois, only 5% of the world’s largest companies have a CDO, and in some industry sectors – such as utilities – CDOs are notable only by their complete absence. Bourgeois is the founder and editor of US-based, a global community of senior digital professionals. ‘We’re bullish on the role expanding for the next three to five years,’ he says. ​‘As more and more digital overnight sensations like Airbnb, Netflix and Uber emerge – which get boatloads of coverage by the press and give CEOs and boards of directors fits – we expect more companies to rely on CDO-centric strategies to direct digital transformation efforts.’

Fighting back against these disruptors and mould-breakers requires an intersection of strategy, marketing, technology and innovation. According to the PwC report Adapt, disrupt, transform, disappear: the 2015 chief digital officer study, corporates in consumer-focused industries – such as media, entertainment, food and beverage, and consumer products – are at the forefront of the CDO trend. The report looked at 1,500 of the world’s largest companies. It noted: ‘Large companies are ahead of the curve, no doubt due to their sheer complexity and the greater effort involved in carrying out the necessary digital transformation.’

Companies in Europe are hiring CDOs faster than anywhere else, but Bourgeois says the CDO role is still ‘skewed towards the US, with about 75% of the incidence. However, we’ve witnessed a significant uptick in CDO appointments in France recently, as well as Australia and New Zealand.’

Flexible friend

And if you think that CDOs are technologists, think again. CDOs come from a wide variety of backgrounds, according to the PwC study, but by far the most common is marketing and sales (a combined 51%), followed by technology (14%). The PwC report says: ‘This suggests just how differently the CDOs and the companies that hire them imagine the role, and how varied the digital needs and pace of transformation are from one company to another. Flexibility is perhaps the single most important success factor for executives new to the position. CDOs who can adapt to rapidly changing circumstances while staying tightly aligned with their companies’ business goals will be in the best position to lead the way to a full digital transformation.’

The CDO is about transforming for survival in a digital age. That makes it a cross-functional role, overseeing the transition of operations, sales and marketing, systems and production, along with the internal corporate culture and in some cases the company’s very products and services.

Not all corporations need to find room around the board table for a CDO. New companies – those started less than a decade ago – don’t need a CDO because digital is likely to have been in their DNA and operations since day one. The CDO is one corporate response to those nimble startups nibbling away at market share or profit margins. As such, CDOs could be given more freedom than their C-suite colleagues. ‘Digital is an approach that can accommodate failing fast,’ says Bourgeois. ‘No other C-level position is allowed to take such an approach, nor have they been trained in how to operate in that kind of an environment. CMOs [marketing] or CIOs [information] don’t get applauded for having two, three or four tactics fail or abandoned – they get fired. If a CDO is successful on 60% of projects, he or she is doing a great job.’

Despite the importance that some are attaching to the emerging role, the PwC report suggests that the rise of the CDO may not be all-encompassing. It concludes that some companies may already be past the point where they see the digital need as sufficiently pressing to assign it a dedicated executive with the title of CDO. The metals and mining sector, for example, appears to have found few opportunities to date to leverage digital technologies. But first movers are likely to figure out the value of greater digital interaction with both equipment suppliers and downstream customers, and how they can generate greater transparency into better order status, pricing and quality while benefiting from the increase in data and analytics about internal operations.

The perception of a need for a CDO is heavily influenced by a company’s approach to digital strategy. Some have travelled far along the digital road, while others have barely got to the starting point and are only now starting to feel its effects. 

Defining digital

Gartner has undertaken research – published at the end of January – among CEOs to find out what they look for when hiring a CDO, as well as the impact of the CDO role on chief information officers. The CDO has been seen as a threat to the CIO, but Gartner suggests that the latter should respond by developing rapid-response IT organisations, devoting more resources to digital projects and working with the CEO to clarify what digital really means for the organisation. 

The research and advisory firms found that while enterprises hire CDOs to lead digital transformation, digital has various definitions. ‘It could refer to customer engagement through digital channels,’ says Ken McGee of Gartner, ‘or it could mean creating a full-scale digital business, as with GE’s industrial internet strategy. Thus, the requirements for CDO positions reveal a lot about the enterprise’s overall vision for digitalisation.’ 

CDOs are being hired from outside the organisation as boards start to tune into digital and recognise their current talent portfolio lacks the skills needed. But wherever a CDO is found, Bourgeois reckons they will either make the directors happy or at least appease them. ‘It’ll provide the organisation with some breathing room to figure out a digital strategy or accelerate one. Appointing a CDO may not quite be a no-brainer, but it can no longer be seen as a controversial move.’

The CDO title may still be absent in the overwhelming majority of boardrooms across the globe, but with such corporate heavyweights as Cisco, Samsung and Total having joined GE in appointing CDOs in the past few months, the profile of the CDO is on the rise. 

Peter Williams, accountant and journalist